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Caroline Njoki Kuria and Gasper Rogasiani Asenga, both directors of Crystal World Agencies Limited faced 13 counts of omitting from tax returns production amounts. [Photo/ Courtesy]

In the last couple of years, the Kenya Revenue Authority (KRA) has tightened its nose against tax cheats, from those that owe thousands to corporates that owe billions.

While most individuals and companies opt for the Alternative Dispute Resolution (ADR), others go for full court hearing. Some win, some lose while some get shut down (in the case of businesses) and lose their assets.

In August 2020, KRA detectives identified 1,309 firms and wealthy individuals that owe it Ksh259 billion.

KRA flagged firms in the construction, importation of hardware and household goods, scrap metal dealers and importers of electronic items including mobile phones for under-declaring VAT dues.

Business Today looks at six blue chip companies that are currently struggling to pay billions to the government, after allegedly evading taxes.

Keroche Breweries

The company is the latest to face the wrath of the taxman, having lost a Ksh9.1 billion case in 2021, forcing the brewer to seek an out-of-court settlement with KRA.

This followed six appeals filed by Keroche before the Tax Appeals Tribunal in 2015 and 2017 respectively.

In three of the appeals, the contention was the manufacturing process of Vienna Ice Brand of Vodka. The brewer argued that, Vienna Ice brand of Vodka was not a distinct product from Crescent Vodka since Vienna Vodka was produced by diluting Crescent Vodka which process did not amount to manufacture.

In the other three appeals, the contention was with regard to classification of pineapple based wines. The Brewer had argued that what they produced was fortified wines which should be classified under HS Code 22.04 which attracted lower excise duty rate of 40%. Their position was that the classification was specific for any fortified wine.

KRA’s position was that HS code 22.04 was reserved for wines based on grapes and the Keroche’s fortified wine was purely fermented pineapple as such is to be classified under HS Code 22.06 which is for any other fermented beverage. HS code 22.06 attracted a higher excise duty rate of 60%.

In December 2021, the company defaulted on payments agreed upon in a court-sanctioned deal with KRA, forcing the taxman to close the Naivasha-based brewer. The matter was however resolved before the new year and the factory reopened.

Car & General

KRA is currently demanding Ksh677 million from Car & General being unpaid tax accrued over six years ended 2020, arising from the company’s three-wheeler or tuk-tuk business.

“In particular, the KRA issued a customs tax assessment during the year of Ksh677 million, excluding interest and penalties. This assessment is in respect of the company’s tariff classification for three wheelers for the years of income 2015 to 2020,” said Car & General.

The company recorded a net profit of Ksh887.2 million in the year ended September 2021.

Africa Spirits and WoW Beverages

The Thika-based companies owned by businessman Humprey Kariuki could be the biggest case of tax evasion, with the initial figure having been set at Ksh41 billion.

Unlike other tax evasion cases, Kariuki was accused of using excise stamps on its goods, leading to the massive tax demands.

When KRA officials and the police raided Africa Spirits in 2019, they found 21 million counterfeit KRA excise stamps that were disguised as water labels and which KRA officials estimated to amount to a loss of Ksh6 billion had they hit the market.

The company remained closed for sometime, before the court ordered that the premises be handed over to the owners in April 2021. The case is yet to be concluded.

Jhulay LAL Commodities Ltd

Jhulay LAL’s principal activity is the wholesale and retail sale of rice sourced from Pakistan. The company owes the taxman Ksh1.5 billion to KRA following a court ruling in May 2021.

The Tax Appeals Tribunal dismissed an appeal filed by Jhulay LAL Commodities Ltd on grounds that the firm had failed to prove that KRA’s assessment was excessive.

Jhulay LAL Commodities Ltd appealed the decision of KRA contesting that the entire tax of Ksh1,456,433,604.00 demanded. The main grounds of the appeal was that the Commissioner determined the taxable income on the basis of its gross bankings against the basic accounting principles and tax law.

Paleah Stores Limited

KRA won a Ksh9.3 billion tax case against Paleah Stores Limited in a judgment delivered on January 22, 2021 by the Tax Appeals Tribunal.

The amount constitutes of Ksh1,361,746,295 corporation tax and Ksh7,891,387,842 in value added tax inclusive of interest and penalties. Paleah Stores Limited had appealed to the Tribunal in May 2017 contesting assessment and demand of the taxes by the KRA for the years of income 2008 to 2014.

Documents filed at the Tax Appeals Tribunal indicate that for five years leading to 2014, Paleah Stores Limited lied to the KRA about how much it was making in its sale of construction materials and foodstuff.

In total, the KRA is set to recover Ksh7.89 billion in VAT and Ksh1.3 billion in corporation tax that was not paid between 2008 and 2014. Both amounts include penalties and interest.

The owner, Patrick Njiru Kuria, has managed for years to lead a silent life away from the media unlike other multi-billionaires.

Oxygen 8 East Africa Limited

The case of Oxygen, an international communications firm in Nairobi, dates back to 2020 with the amount in question being Ksh1.2 billion.

The tax tribunal at Nairobi dismissed an application by Oxygen 8 East Africa Limited, seeking extension to file an appeal out of time to contest the tax debt. The tax dispute arises from KRA’s investigation audit against the firm for July 2015 to February 2019 that raised an assessment of Ksh1,185,596.692 for withholding tax. The assessment was confirmed vide an objection decision on May 21, 2019.

Read: Keroche Fights to Survive as KRA Comes Knocking

>>> KRA Zeroes in on Landlords With New Technology

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